I am aware of the 1.3l diesel (Lupo in the U.K., I guess), but we haven't seen them as of yet. I guess they think they won't sell enough of them as long as fuel is cheap, but in reality they needed to solve the emissions problem first, I suppose.

My Jetta has a 1.9l turbodiesel and gets about 50mpg. That's the only diesel engine configuration that VW sells in the U.S. (I suppose I could order parts from overseas and build a frankencar - don't laugh - I know people who have done things like this).

There are people at www.TDIClub.com who work to maximize fuel economy - one guy drove from Salt Lake City to Philadelphia, and got > 70mpg. He got stopped by the police for driving too slow however, so this wouldn't work for everyone. The guy who did this is a retired aeronautical engineer, and gave a talk about coefficients of drag and maximization of fuel economy.

My guess is that you could scale the Jetta back to a 1.6l engine and the car do just fine - just a little slower. For the 1.3l to work, you would probably need a lighter body like the Lupo.